The American Express Retail Monitor 2006

The American Express Retail Monitor 2006
Table of Contents
Executive summary .......................................................................................................................................................................... 3
Research methodology ..................................................................................................................................................................... 5
Retail confidence .............................................................................................................................................................................. 6
Festive spirit ..................................................................................................................................................................................... 7
Key business objectives.................................................................................................................................................................... 8
The 21st century shopper ............................................................................................................................................................... 10
High street headaches .................................................................................................................................................................... 11
Differentiation difficulties ................................................................................................................................................................. 12
Stages of purchase......................................................................................................................................................................... 14
Customer information ..................................................................................................................................................................... 16
Conclusion...................................................................................................................................................................................... 17
2
Executive summary
The American Express Retail Monitor 2006 focuses on the key commercial issues affecting
retailers across Europe. This report explores business confidence in the lead up to the festive
period and highlights retailers’ significant concerns and observations relating to an increasingly
sophisticated consumer audience.
The retail sector is a critical part of Europe’s economy. In the UK, for example, 11% of all
enterprises in the UK are retailers. UK retail sales were £249 billion in 2005, larger than the
combined economies of Switzerland and Ireland (British Retail Consortium)
The survey highlights the operating pressure that retailers are currently experiencing. Key trends
identified are increasingly educated customers demanding more product information, eroding
retailer brand loyalty and customer fragmentation. Ultimately, the customer drives the sale. The
American Express Hospitality Monitor reveals what Europe’s retailers think about how their
customers operate in 2006. Some of the key findings revealed by the survey are as follows:
Bullish confidence
•
Half of Europe’s retailers (50%) are confident that they will perform better over the next 12
months than over the past 12 months, whilst 32% will perform the same and 18% predict a
less confident trading performance over the next 12 months.
•
Confidence is highest in the UK (62% of retailers expect a better year) and lowest in France
(30% expect a better year)
•
Retailers selling via an online channel express more confidence (59%) than those selling
through stores alone (45%)
Multi-channel mania
•
36% of retailers believe most of their customers shop across channels
•
Only half of multi-channel retailers (49%) believe their channels are completely integrated
including ordering online and collection instore.
•
Whilst retailers consider that online will grow faster in next 2 years (68%), bricks and mortar
stores are believed to foster most loyalty (91%)
Festive spirit
•
Across Europe, on average Christmas accounts for 29% of annual turnover, for the UK this is
27%.
•
46% of European retailers believe that their own business performance this Christmas will be
better than last
•
Retailers with an online and store channel are most optimistic about festive season, 56%
predict a better Christmas than last year compared to 40% of those selling via stores alone
3
st
The 21 century shopper
•
76% of retailers define their customers as value-oriented whilst 65% describe them as
informed about competing retailers.
•
Only 58% of retailers consider most of their shoppers to be loyal
•
Retailers believe that pre-purchase information search (32%) and browsing (32%) are more
important to the overall customer purchase experience than actually making a
purchase.However, what may start as a mission to purchase a particular product can morph
into browsing.
•
This is an opportunity that retailers are very attuned to and provided that they can understand
what persuades shoppers to put other things in their baskets or trolleys, one that can
significantly boost sales.
•
71% of Europe’s retailers can identify their most valuable customers
Differentiation difficulties
•
Assuming product and price were the same, retailers think product selection/ availability
(85%), followed by friendly (74%) and knowledgeable (67%) staff are the biggest
differentiators between stores
•
For websites, again product selection/ availability (85%) is number one followed by product
information (79%) and ease of use/ navigation (70%)
Payment preferences
•
35% of retailers believe choice of payment methods has strong influence on store selection
•
In Germany and UK, cheques are only considered main payment method by less than 10% of
retailers whilst credit and debit card use dominates for more than half of retailers.
•
Overall, 31% of retailers report more use of credit cards than usual during the sales
4
Research methodology
The American Express Retail Monitor 2006 was conducted by Loudhouse Research, an
independent market research company based in the UK.
Food & Drink
26%
Clothing & Footwear
Fieldwork was carried out during September 2006. A total of 250 detailed, quantitative telephone
interviews were conducted with general manager level contacts across European retailers (UK,
France, Germany, Spain and Italy).
Health & Beauty
Furniture & Homewares
Retailers had to reach a threshold annual turnover level of €35 million in order to qualify for the
survey. Retailers from a range of industry sectors were represented and both store and multichannel retailers were included. Key differences by country or retailer type are highlighted within
the report.
The American Express Retail Monitor 2006 provides operations management with a snapshot of
the business outlook of other mid- to high- end European retail businesses and a meaningful
insight into how retailers are responding to the myriad pressures they face.
19%
Electrical & Telecomms
10%
9%
8%
DIY & Garden
7%
Multiple/ department store
7%
Other
7%
Fig 1: Sample breakdown by sector
Store
98%
Online
Catalogue/
mail order
Multi-channel
43%
24%
47%
Fig 2: Sample breakdown by channel
5
Retail confidence
More confident
Half of Europe’s retailers (50%) are confident that they will perform better over the next 12 months
than over the past 12 months whilst only 18% predict a dwindling trading performance.
Confidence is highest in the UK, where 62% of retailers are expecting a better year and lowest in
France, where just 30% forecast an upturn although 50% consider performance will be much like
the last 12 months. [Figure 3]
Those retailers who sell via an online channel express a higher level of confidence (59% predict a
better year) than those selling through stores alone (45%). Different channels clearly present
different challenges and multi-channel retailers, represented by almost half of the sample (47%) in
the American Express Retail Monitor 2006, arguably face the biggest test – that of offering a
seamless multi-channel proposition where range, price, product information and customer service
are consistent.
All
Industry statistics show that online retailing is booming. According to the IMRG, the e-retail
industry body, British shoppers spent £13.5 billion online during the first half of 2006, 40% more
than they did during the same period last year. Whilst 68% of multi-channel retailers responding
to the American Express Retail Monitor 2006 anticipate that the online channel will experience the
most growth in the next two years, the vast majority maintain that that customers spend more
money through stores (86%) and that stores foster the most loyalty amongst their customer base
(91%). [Figure 4].
These channel dynamics present an interesting dichotomy for retailers selling via stores and the
Internet .
Less confident
50%
UK
32%
62%
Germany
58%
Italy
56%
Spain
France
12%
30%
12%
24%
20%
34%
30%
24%
50%
Store & online
channel
20%
62%
25%
46%
0%
18%
26%
42%
Store only
Although 36% of retailers believe that most of their customers shop across channels, most
notably in France where this figure increases to 58%, it would seem that there are considerable
gaps in retailers’ multi-channel strategies with only half (49%) considering that their channels are
completely integrated.
Same
20%
36%
40%
60%
13%
18%
80%
100%
Fig 3: Confidence in trading performance prospects
facing business (next 12 months compared to last 12
months)
Which channel do
you believe….
Fosters most
loyalty
amongst
customer
base
3%
Customers
spend the
most money
through
4%
91%
6%
86%
Store
11%
Online
Catalogue
Will
experience
most growth
in next two
years
30%
68%
2%
0%
20%
40%
60%
80%
100%
Fig 4: Perceptions of different channels
6
Festive spirit
Christmas is undoubtedly the busiest time of the year for retailers, with planning beginning months
in advance and festive stock appearing as early as September in some stores. Across Europe,
on average Christmas accounts for 29% of annual turnover. A slow Christmas sales period can
therefore undo in less than six weeks all the hard work of the previous twelve months.
Better
All
Those with an online channel are more optimistic about the festive season, 56% predict a better
Christmas than last year compared to 40% of those selling via stores alone. According to the
Interactive Media in Retail Group (IMRG), Christmas online sales in the UK are set to hit around
£9 billion this year, compared with last year’s £5 billion total.
A key indication of festive confidence is the timing of Winter sales. Early winter sales are seen as
a way to drive business if retailers anticipate a slow holiday sales. Across Europe, a third of
retailers (33%) are planning to start their Winter sales one or two weeks before Christmas.
[Figure 6] It would seem therefore that the majority of retailers are relatively optimistic and are
looking at other ways, such as through advertising or marketing, to attract customers this year.
46%
56%
UK
48%
Italy
47%
France
45%
Spain
46%
6%
35%
18%
55%
50%
Store & online
channel
14%
56%
41%
40%
0%
7%
44%
36%
Store only
Almost half of UK retailers (48%) believe that they will perform better this Christmas than last,
whilst 46% are expecting similar results to last year. This finding concurs with the recent
deliberations of the KPMG/ SPSL Retail Think Tank (RTT), which concluded that the Christmas
2006 trading period will be as good as – if not slightly better than last Christmas, which may
deliver the economic boost the UK retail sector it is looking for.
Worse
46%
Germany
The American Express Retail Monitor 2006 reveals that 46% of Europe’s retailers believe their
own business performance this Christmas will be better than last, and only 8% predict a downturn.
[Figure 5]
Festive spirit is most positive in Germany, where 56% of retailers expect a better Christmas. This
is not surprising given that three-quarters of German retailers (78%) believe consumers will spend
more than usual before expected interest rate hikes take effect early next year. At the other end
of the spectrum, Spanish retailers are the least likely to forecast a better festive trading
performance than last year (36%).
Same
3%
51%
20%
40%
9%
60%
80%
100%
Fig 5: Confidence about retail performance this Christmas
compared to last Christmas
Two weeks before Christmas
One week before Christmas
Immediately after Christmas
After 1st Jan
One week after New Year
More than one week after New Year
20%
All
13%
16%
UK
Spain 2%
Italy
14%
4%
27%
25%
26%
16%
France
26%
2%
2% 17%
20%
18%
38%
24%
Germany
0%
5% 14%
50%
30%
29%
22%
26%
40%
30%
8%
2%
0%
2%
4%
6% 8%
8% 8%
12%
45%
60%
80%
100%
Fig 6: When likely to start Winter sales
7
Key business objectives
Retailers are continually looking to identify ways to improve their productivity, reduce their costs
and generate revenues in an environment where competition is intense and differentiation can be
difficult.
Against such a backdrop, the need to attract new customers (87%), whilst maintaining the loyalty
of existing customers (88%), are critical objectives for Europe’s retailers. [Figure 7]
The retailer ‘to do list’ reflects the increasingly complex environment they find themselves in – a
complexity forged by new channels such as online and changing customer needs. Increasingly,
retailers need to manage seemingly irreconcilable objectives such as cost cutting and innovation
in order to prosper. With 50% of retailers believing that constant cost cutting threatens innovation
in the retail environment, therefore they have to strike a fine balance.
In the competitive world of retail, image is everything. How a retailer is perceived by customers,
and the speed with which word of mouth and increasingly web-based feedback spreads, can
make or break a retailer. So in 2006, what image are the retailers of Europe trying to project?
[Figure 8]
Offering excellent customer service is a goal of more than 9 out of 10 retailers in Europe. Whilst
88% of retailers claim to be focused more on customer service, Only half of retailers consider that
their customers actually place a premium on service.
Convenience is a watchword in retail and offering a wide choice of products is considered
important by 88% of retailers, whilst fewer (76%) of retailers would ideally like to be seen as
innovative.
Customer service and innovation in retail can take many forms. Carrefour, for example, has
introduced a complimentary internet service at its customer service counter to cater to male
customers who tend to wait outside the store while their spouses shop. Other examples include a
wash basin situated beside the fresh fish section, so that customers can easily wash their hands
after hand-picking fish and meat; and phone charging services for those on the move.
Increasing sales
90%
Keeping existing customers
88%
Attracting new customers
87%
79%
Customer service
69%
Improving margins
Cost savings
64%
Staff motivation
59%
Tightening supply chain
48%
Innovation
47%
Expansion
46%
0%
100%
Fig 7: Key business objectives for the next 12 months
Excellent
customer service
93%
Offering wide
choice of
products
88%
Innovation,
design of
products
76%
Attractive store
layout/ design
74%
Ethically,
environmentally
responsible
Luxury,
exclusivity of
brand
58%
54%
0%
100%
Fig 8: Image retailers see as important to portray
8
To add a further dimension, just over half of retailers (58%) are keen to be seen as ethically
responsible. A recent study by American Express highlights the rise of the ‘conscience consumer’.
One in three people can be described as conscience consumers, whose purchase decision
making is highly aligned with their social, ethical, environmental and civic values. A YouGov
study this year further highlighted that 87% of consumers thought retailers have a responsibility to
ensure the products they sell are manufactured in a fair and humane way. In July 2006, Marks
and Spencer became the first mass market retailer in the UK to launch Fairtrade jeans and other
retailers are fast realising that shoppers want to feel safe, comfortable and guilt-free about what
they are buying and are responding to this shift in consumer conscience.
A further issue to highlight is the danger of trying to be ‘all things to all people’ and the risk of
retailers spreading themselves too thinly and consequently failing to deliver a solid, consistent
image across multiple channels.
Ultimately, customers, however fluid their attitudes or
changeable their needs, remain the single most important element of the retail equation – their
opinions drive behaviour, and ultimately sales and profits.
9
The 21st century shopper
Value oriented
Today’s shoppers have far greater expectations of the shopping experience than previous
generations. Retailers are likely to consider their core customer base as being value-oriented
(76%) and informed about competing retailers (65%). [Figure 9]
This desire for value presents an enormous challenge for retailers as consumer reference points
for price and quality are continually shifting. Some commentators believe that in certain sectors,
such as fashion and clothing this signals the end of the mid-market where retail has become
polarised with value-driven stores with low prices and volume sales at one end of the spectrum
and the smaller fashion multiple that has a lower volume but higher margin at the other.
The proliferation of comparison shopping sites serves to highlight customer hunger for information
and their quest for the best value proposition. Increasingly discerning customers are demanding
more and more information, a phenomenon dubbed ‘infolust’ by trendwatching.com.
Informed about competing
retailers
65%
Loyal
58%
Place a premium on service
Shop across different
channels
Ethically minded
The rise of the multi-channel shopper (36%) emphasises further the increasing sophistication of
consumers, although a consumer’s willingness to shop across channels should not be confused
with loyalty. In 2006, only 58% of Europe’s retailers consider their customers to be loyal.
76%
50%
36%
33%
Fig 9: Characteristics retailers associate with majority
of customer base
10
High street headaches
The media has focused strongly on the rise of the supermarkets at the expense of the cornershop, evidenced by the fact that Tesco now accounts for £1 in every £7 spent in the UK. The
American Express Retail Monitor 2006 highlights however that amongst mid- to high-end retailers,
the competitive landscape is far more fragmented, and arguably healthy, with threats coming from
many different types of retailer. [Figure 10]
Local high street retailers are seen to pose the biggest threat in all countries except France,
where supermarkets nudge ahead in the competitive stakes. Being home to Europe’s largest
retailer, Carrefour, this is perhaps not surprising.
Local high street retailers
Pure online retailers
Other
All
32%
22%
UK
32%
24%
Spain
Italy
Pure online retailers are not typically seen as a huge threat. According to the British Retail
Consortium, sales over the Internet account for less than 4% of total retail sales. However, the
IMRG has estimated that if the UK’s 26,000 online shops were bricks and mortar, they would form
a high street 50 miles long, with 5 million products for sale.
These findings point more and more towards a future where multi-channel retailing will dominate
and the winners in the retail race will be those who can successfully harness the opportunities this
presents.
Local supermarkets
Other multi-channel retailers
Germany
France
36%
23%
0%
24%
8%
40%
18%
26%
6% 8%
2%
27%
10% 10%
26%
20%
21%
28%
33%
38%
7%
8%
22%
14%
22%
20%
21%
60%
10%
23%
80%
100%
Fig 10: Main perceived competitive threat
.
11
Differentiation difficulties
Consumers have a wider range of choice in channels and stores from which to make their
purchase than ever before. Enhanced competition in mature, crowded retail marketplaces is
making it harder for retailers to sustain differentiated brands and value propositions.
In the American Express Retail Monitor 2006, retailers were asked to rate the relative importance
of a number of criteria in terms of how important they felt they were in encouraging customers to
buy something from one store over another, assuming that product and price are the same.
[Figure 11]
Topping the list of store purchase criteria is product selection and availability, considered critical
by 85% of Europe’s retailers. In some cases, high street shops must concentrate on the
convenience of their service and broaden product range if they are to entice people away from
supermarket giants. Ensuring that the shelves are stocked with the right products, however, can
be tricky and getting it wrong can leave a retailer struggling to sell unwanted goods at a
considerable markdown.
People are seen as key differentiators between stores. As the ‘face of the brand’ and critical in
any customer service drive, retailers consider that having friendly (74%) and knowledgeable staff
(67%) can make all the difference. It seems that “service with a smile” is no longer a cliché but a
very real business driver for retailers.
Strong influence
Some influence
Product selection/ availability
85%
12%
74%
Friendly staff
Knowledgeable staff
67%
Brand
64%
24%
26%
25%
Shorter queues/ ease of store use
50%
31%
Store layout/ design
47%
41%
Delivery service
39%
28%
Choice of payment options
35%
38%
Return policies
32%
31%
Personalised offers
29%
33%
Self-service shopping options
20%
25%
Fig 11: Purchase criteria for store purchases assuming
product and price are the same
Another element that has a critical impact on customer choice according to almost half of
Europe’s retailers (47%) is store layout and design. With bigger stores in particular, getting the
layout right is vital to optimising the customer experience and maximising sales.
12
When it comes to web purchases, interestingly the results do not differ dramatically with product
selection and availability still considered the top priority for customers. [Figure 12]
Product information is deemed to be a key differentiator by more than three quarters of retailers
with an online channel. As consumers are becoming more sophisticated online retailers need to
ensure that the product information they provide is comprehensive, accurate and compelling in
order to secure a sale.
Ease of use and navigation is still considered critical by 70% of online retailers. Despite the
increasing maturity of online channels and the existence of standard navigation practices amongst
successful sites, other research suggests that retailers still have some way to go to ensure there
are no weaknesses in this aspect of their business. According to research by retail analyst,
Verdict Consulting, UK retailers lost an estimated £84 million of online sales in the busiest quarter
of 2005 due to unreliable websites.
As with the store channel, the look and attractiveness of a website holds significant sway over
customer purchase preferences, 47% see this as critical. The emergence of accepted best
practice in the design of retail websites makes the process quicker and easier for the customer
and enhances comfort and security with transactions.
Strong influence
Product selection/ availability
85%
Product information
70%
Secure payment options
69%
Brand
66%
Delivery options
Customer service points of contact
Look/ attractiveness of the website
Return policies
Choice of payment options
12%
79%
Ease of using/ navigating the site
Personalised offers
More than half of online retailers consider that customer service (57%) can hold the key to
differentiation. One challenge for online retailers is to ensure the online experience and delivering
customer service in the way that customers have come to expect from the high street.
Some influence
18%
25%
20%
20%
58%
36%
57%
47%
38%
35%
30%
34%
34%
26%
43%
37%
Fig 14: Purchase criteria for web purchases assuming
product and price are the same
Retailers are judged on all aspects of their interactions with customers and many factors affect
perception of a brand and can influence buying decisions across channels. Getting it right in one
channel is great, getting it right across multiple channels is even better. Supporting this point is
the finding that 59% of retailers selling online believe that good online experience fuel store sales.
13
Stages of purchase
The shopping experience for a customer encompasses everything that happens before, during
and after they make a purchase. What a customer experiences at each of the stages together
can affect how they view a particular retailer.
The American Express Retail Monitor 2006 reveals that retailers believe the pre-purchase stage,
which involves information gathering and comparison, together with browsing are more important
to the overall customer experience than the actual purchase. [Figure 15]
The report has already highlighted the rise of the savvy shopper, a growing population of
consumers who research competing offerings on the Internet. Previous research has highlighted
that this behaviour is more widespread in certain sectors, such as consumer electronics which are
perceived by customers to be ‘high risk’ purchases and as such are preceded by extensive search
activity which may include gathering technical information, looking for ideas about what to buy,
comparing prices as well as searching for special offers. Pre-purchase activity is considered to be
a particular critical phase of the purchase experience by German retailers, where 40% consider it
to have the biggest impact on a customer’s overall purchase experience whilst in Italy, this figure
drops to 24%. For retailers, this pre-purchase activity provides a significant opportunity to
enhance relationships before customers even walk into the store.
Pre-purchase
Entering/ browsing
Check out
After sales support
All
32%
UK
34%
Spain
Italy
Germany
France
28%
24%
32%
17%
32%
22%
40%
20%
26%
20%
14% 4%
16%
28%
47%
40%
8% 11%
14% 6% 14%
41%
34%
0%
Decision to buy
60%
4%
18%
8% 8%
6%4% 9%
80%
100%
Fig 15: Stage of purchase considered to have most
impact on overall customer experience
The culmination of all this pre-purchase activity is that customers are entering stores with higher
expectations than ever before for a hassle-free experience that gives them information they need
to make right decision and gets them through a store efficiently. However, what may start as a
mission to purchase a particular product can morph into browsing. This is an opportunity that
retailers are very attuned to and provided that they can understand what persuades shoppers to
put other things in their baskets or trolleys, one that can significantly boost sales. Indeed, along
with pre-purchase activity, entering and browsing the store is seen by 32% of retailers as the
stage that has the biggest impact on customers’ overall purchase experience. Browsing is
considered a particularly significant part of the retail process by retailers in France (47%) and Italy
(41%) whilst much lower down the consumer agenda according to German retailers (16%).
14
What the stores need is a new way to attract the attention of shoppers, who are now behaving
quite differently to the way they did a generation ago. Many shoppers practice what is known as
“laser-shopping”, entering a store to buy a particular product at a particular price, having already
compared prices and quality online.
Retailers are employing a variety of techniques to engage the customer in store – from the
sensory stimulation that Lush, the handmade cosmetics company, is renowned for to innovative
store layouts that maximise ‘browsability’. In online retail situations, being able to persuade socalled ‘meanderthals’, who simply are aimlessly browsing to kill time, to purchase products
provides a further sales boost.
Although only 8% believe that the check-out phase of purchases has the biggest impact on
customers’ overall purchase experience, for store and web purchases alike, 35% of retailers
consider that the choice of payment options has a strong influence on store selection.
Cash
Credit/ charge card
All
30%
UK
Italy
Overall, 31% of Europe’s retailers also report more use of credit cards than usual during sales or
markdowns although there are distinct differences by country in this upsurge of credit card use.
Increased use is most marked in Italy, where are cash is the primary method of payment retailers
expect consumers to use according with the Retail Monitor and less obvious in Germany, where
credit card usage is already relatively prevalent. [Figure 17]
16%
27%
38%
32%
49%
0%
20%
13%
52%
47%
Germany
Cheque
26%
28%
50%
France 2%
The American Express Retail Monitor 2006 reveals retailers anticipate consumers will ditch the
chequebook and reaching for the plastic in greater numbers. In the UK and Germany, in
particular, retailers consider that cheques are in terminal decline whilst the use of debit and credit
cards are increasing. According to about half of retailers in Spain (50%) and Italy (47%), cash is
still king. [Figure 16]
31%
16%
Spain
Debit card
34%
12%
24%
8%
40%
4%
0%
14%
6%
42%
60%
80%
100%
Fig 16: Primary method of payment retailers expect
customers to use this year
All
31%
Italy
55%
UK
34%
France
26%
Spain
26%
Germany
16%
0%
60%
Fig 17: Retailers who see increase in credit card usage
during sales/ markdowns
15
Customer information
The increasing sophistication of the Customer Relationship Manangement data capture available
means that retailers, more than ever have the tools at their disposal to better understand exactly
how their customers shop. Once distinct attitudes and behaviours have been identified, retailers
can then target distinct phases with specific messaging tailored for each stage to increase
relevance.
However, everyone shops differently and rather than risk spreading themselves too thinly and
creating an experience that does not properly serve anyone’s needs, many retailers are focusing
on understanding and addressing the needs of their highest value customers. Indeed, almost
three quarters of Europe’s retailers (71%) are able to identify their most valuable customers – this
is highest in France (89%) and lowest in Italy (59%). [Figure 18]
71%
All
57%
89%
France
81%
74%
Spain
42%
72%
Germany
66%
62%
UK
Initiatives
59%
Italy
The ability to identify valuable customers however, does not always translate into specific
initiatives aimed at boosting their loyalty – just over half of retailers (57%) have developed specific
loyalty initiatives, again much higher in France (81%) than in other European countries such as
Spain (42%) and the UK (44%). These initiatives range from newsletters, advance notice of sales
and free gifts to more personalised, exclusive services. [Figure 19]
Retailers are in a better position than ever to turn customer insights into marketing tactics and
create personalised shopping experiences that are tailored to the preferences of their customers.
In a competitive, multi-channel environment the need to do this has never been greater.
Identify valuable
customers
44%
49%
0%
100%
Fig 18: Retailers identifying and offering initiatives to
most valuable customers
Value add information/
newsletters
61%
Prior notice of offers/ sales
59%
Free gifts
57%
Premium membership cards/
marketing collateral
56%
Higher points/ loyalty incentives
56%
45%
Access to exclusive services
10%
Other
0%
80%
Fig 19: Types of initiatives offered to most valuable
customers
16
Conclusion
The American Express Retail Monitor 2006 finds European retailers in reasonably buoyant mood
in the build up to Christmas and into the New Year. With many European countries becoming
increasingly reliant on the consumer economy and predictions for both being lean, at best, across
the Eurozone countries featured in the report, this positive sentiment challenges the current
economic status quo.
It remains to be seen how 2007 stacks up for the high street, but looking at retail sentiment,
confidence is evident. The retail sector is established, relatively stable and widely understood,
even reaching the status of an economic barometer for many countries. As such, ‘gut feel’ from
members of the retail community should not be underestimated. So what are the reasons for the
retail feel good factor?
With 68% of respondents believing that the biggest growth opportunity over the next two years will
come from the internet (more than double the number that see growth in store sales, 30%), one
significant contribution to retail confidence can be assigned to the internet. Also, those
companies that operate both online and store channels to market are more confident than their
traditional ‘bricks and mortar’ neighbours. There are many positive signs for e-commerce after its
more-than-hyped arrival into everyday business 5 years ago. Retailers are more familiar with the
appropriate strategy to deliver online revenue and consumers are more confident to buy online.
However, the internet can only enhance what is already in place, wholesale changes in retailing
are not driven by technology alone.
At a Eurozone level, one finding to balance out enthusiasm for all things digital is the level of cash
expected to change hands this year. Respondents believe that 1 in 3 sales will go through till as
cash over the next 12 months (1 in 2 transactions in Italy and Spain). However, on average
across Europe, 57% of payments are made with either credit or debit cards (80% in the UK),
making plastic the preferred payment method in the region. Regardless of the payment
mechanism, the percentage of sales coming from internet transaction over the next two years will
still only represent a fraction of overall retail purchases. Yet, optimism in the area is valid. New
sales channels, especially ones with the power and intelligence of the internet are not created
every day. Clearly retailers are keen to exploit the medium to its maximum potential in order to
realise new commercial targets.
Another technology-driven boost to confidence should come from the improved visibility we have
of consumer purchasing behaviours and needs. Automated purchasing via the internet and card
transactions generate huge amounts of data to help retailers understand who the customer is.
On average, 71% of businesses are aware of who their valuable customers are, with 57%
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targeting them with marketing initiatives. Though CRM is implemented with varying degrees of
intensity in retail, vendors are establishing a much richer picture of the customer base.
Outside the macro economic picture, retailers this year have a wider range of channels to offer
customers, a more customer base in terms of channel utilisation and a growing understanding of
what gets the customer spending. These things combined could get any retail outlet excited
about sales targets. Is 2007 the year where retail operations and marketing click?
Christmas Chemistry
It is a grand claim to assume that operational excellence can out-manoeuvre market forces, but
more plausible to see it inspiring confidence in European retail.
Christmas is a retail
phenomenon, accounting for 29% of annual sales on average. It is the eye of a storm from which
many lessons can be learned regarding retail activity and customer purchasing. Following a slow
Autumn period, industry watchers are raising the stakes on Christmas to salvage slower sales
figures. January will serve up many case studies on just how well supply, demand, service and
availability requirements have been met.
The two main priorities for retailers from the survey are to give customers what they want (product
availability) and support that with a positive shopping experience. This is where knowing the
customer comes to the fore because without a clear picture of customer need both of these
priorities will suffer.
Christmas presents an interesting exercise in just how much retailers are prepared to support the
adage that ‘customer is king’, as the importance of the event can lead to over-sell and saturation
by over-enthusiastic vendors. In the delicate balance of sales and service, it is something that
retailers should reflect upon as the momentum to Christmas builds. Also within this delicate
balance is the issue of who leads who in the retails exchange? Do retailers respond to demand,
or generate need? Arguably, both approaches are employed.
Looking at the issue of ethical and environmental retailing, the survey shows that 33% of retailers
believe the majority of their customer base is ethically minded, with 58% believing it is important
to portray an image of being environmentally / ethically responsible. This suggests that retailers
are leading an environmental commitment, rather than catching up with consumer demand. This
approach for an altruistic issue such as the environment is very encouraging. However, if such a
disparity where present in other more mundane areas of retail supply, it could prove costly.
Most of all, peaks in sales activity such as Christmas test the mettle of retail and provide an
excellent test bed for winning formulas to capitalise on opportunities. The survey shows that a
closer understanding of the customer and their desire for multiple sales channels and payment
mechanisms will help in delivering a strong finish to 2006 and a buoyant 2007. Can solid
business processes and business intelligence neutralise economic challenges? No, but they can
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challenge competitors less prepared for the peaks and troughs of the dynamic retail market. In an
industry where respondents see threats in equal measure from local high street retailers,
multinational ‘superbrands’ and those embracing the internet opportunity, competitive edge is
clearly the most tangible tool to ensure that the suggested confidence in future performance
prevails.
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